Why The Surprise?

The predictable 0.25% interest rate creep announced last Wednesday hit a number of sectors, notably the Banks, Retail, Building Materials and Infrastructure. The sulking response was surprising given that the expectations were so overwhelming for an increase – the only surprise was maybe that it was a month early. My own view is that the fall in the market was not so much because of the rate increase but more that it gave the market reason to pause and in fact come off the giddy heights it had scaled in the previous months. The logic behind retracements is, in my view, rarely what it seems.

Despite the media beating up the interest rate story for all its worth, the market consensus is that the modest rate increase is good fiscal management and that the overall impact on the two key asset classes – property and equities will be benign. If these asset classes collapse it will be for other reasons.

What we have seen this week is by no means a retracement or even the start of one. Technically the market could still climb higher in the short term.

Despite the US market easing marginally towards the end of the week, I have seen a sudden lift in my bear put and spread positions – some quality stocks are now losing pace with the market.

This week we introduce two new speakers. Firstly Jordan Craw who is one of the youngest members of the Trading Tutors and SITM team. He initially started trading in Options but now focuses on a broader range of markets and instruments including Stocks, Futures and Forex.

We also have Andrew Neyens who is one of the talented writers on the Optionetics team. We believe it is worthwhile to keep options at the forefront as they are becoming an essential tool in portfolio return enhancement and risk management.

Continue to give us your feedback – let us know your views on our newsletter – it is always good to know we are hitting the right mark and are not straying from our mission of making you – our readers - sharper investors.